The Cruelty of History and Geopolitics?

Usually here at Alpha.Sources I refrain from making alarmist calls and crisis mongering statements since most often we economic analysts are painfully incapable of predicting crises but perhaps most of all because of the fact that most severe shocks to the economic system arise in areas far aloof from where economic analyst tend to have their eyes fixed. As such, while I have been busy lately contemplating the possibility of a currency crisis in Eastern Europe and its potentially disturbing effects on global markets, events on the border between Turkey and Iraq are developing in way which, I have to say, is wholly unwanted; emphasis in quotes below is mine.

The PKK guerrilla group said it had also taken "several" soldiers hostage. Turkish Prime Minister Recep Tayyip Erdogan has recalled security officials to Ankara for a crisis meeting. Correspondents say the attacks will increase the pressure on the government to launch raids into Iraq, after it was given clearance to do so by parliament. On Wednesday, MPs voted overwhelmingly in support of a motion to allow the military to launch offensives across the border, against rebels based in the remote, mountainous north of Iraq.

It followed an escalation of raids by the PKK - the Kurdistan Workers' Party - as part of its armed campaign for Kurdish autonomy.

Recep Tayyip Erdogan, the prime minister, appealed for calm on Sunday following the attack. “Whatever steps need to be taken will be taken within the framework of this [parliamentary] authorisation,” he said. The emergency meeting will be chaired by Abdullah Gul, the Turkish president, and will be attended by General Yashar Buyukanit, head of the armed forces, and senior cabinet members and security officials.

Mr Erdogan is under intense pressure to authorise a military raid into northern Iraq to flush out the PKK, which has killed around 50 soldiers and civilians inside Turkey in the past month. Turkey has around 60,000 troops massed on its side of the Iraqi border and has effectively imposed a state of emergency in Hakkari and Sirnak, the two provinces bordering Iraq.

Now, at this point I would like to reiterate my initial points about not being alarmist and essentially it is very difficult to see where all this is going. One of the obvious consequences which can immediately be seen from this is the impact on oil prices which touched briefly at 90 USD a barrel at the end of last week before easing back to just shy of 89 USD. If all hell were to break loose between the Kurds and the Turks my guess would be that oil could easily hit 100 and beyond which goes to show the potential impact. Moreover, I think it is clear that the last thing we need in the Middle East at the moment is for the hitherto peaceful region in Northern Iraq to have its solace wrecked by a nasty conflict between Turkish government troops and Kurdish partisans. For a wider analysis of the Turkish economy as well as the political situation GEM featured some very worthwhilenotes recently. To add to the general uncertainty and in the best tradition of invoking past ghosts and animal spirits, tomorrow marks the 20 year anniverssary for the stock market crash in 1987. On Friday, (US) markets closed in a hefty loss, something which has drawn out many a doomsayer commentary about the potential of a further slide tomorrow as black voodoo magic potentially grips market in a downward spiral. Perhaps it could also merely be a question of fundamentals finally ringing in on the market but my advice to investors is still to play it cool and with calm and may your Monday the 22th be red, blue, pink or any other color than black. Good luck!